Foreign direct investment, human capital and non-linearities in economic growth
This paper makes a contribution to the existing literature on the foreign direct investment (FDI) and economic growth nexus by contrasting past empirical evidence and conventional wisdom and arriving at some interesting new results. By applying non-parametric methods, and thus taking into account non-linear effects of initial income and human capital on economic growth, we explore the FDI effect on growth in much greater detail than previous studies. Our findings not only confirm the non-linear effect of human capital in the presence of FDI inflows but also suggest that FDI inflows are growth enhancing in the middle-income countries while there is a 'two-regime' FDI effect for high-income countries. This new finding appears to be independent of OECD country membership.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mankiw, N Gregory & Romer, David & Weil, David N, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 107(2), pages 407-37, May.
- Magnus Blomström & Ari Kokko & Mario Zejan, 1994. "Host country competition, labor skills, and technology transfer by multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(3), pages 521-533, September.
- Xu, Bin, 2000. "Multinational enterprises, technology diffusion, and host country productivity growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 477-493, August.
- Li, Q. & Wang, Suojin, 1998. "A simple consistent bootstrap test for a parametric regression function," Journal of Econometrics, Elsevier, vol. 87(1), pages 145-165, August.
- Durlauf, Steven N & Johnson, Paul A, 1995.
"Multiple Regimes and Cross-Country Growth Behaviour,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 10(4), pages 365-84, Oct.-Dec..
- Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
- de Mello, Luiz R, Jr, 1999.
"Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data,"
Oxford Economic Papers,
Oxford University Press, vol. 51(1), pages 133-51, January.
- L.R. de Mello Jr., 1996. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Studies in Economics 9615, School of Economics, University of Kent.
- Alan B. Krueger & Mikael Lindahl, 2000.
"Education for Growth: Why and For Whom?,"
NBER Working Papers
7591, National Bureau of Economic Research, Inc.
- Galor, Oded, 2005.
"From Stagnation to Growth: Unified Growth Theory,"
Handbook of Economic Growth,
in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293
- Oded_Galor, 2004. "From Stagnation to Growth:Unified Growth Theory," Working Papers 2004-15, Brown University, Department of Economics.
- Galor, Oded, 2004. "From Stagnation to Growth: Unified Growth Theory," CEPR Discussion Papers 4581, C.E.P.R. Discussion Papers.
- Oded Galor, 2004. "From Stagnation to Growth: Unified Growth Theory," GE, Growth, Math methods 0409003, EconWPA.
- Mamuneas, T.P. & Savvides, A. & Stengos, T., 2002.
"Economic Development and the Return to Human Capital: A Smooth Coefficient Semiparametric Approach,"
2002-14, University of Guelph, Department of Economics and Finance.
- Andreas Savvides & Theofanis P. Mamuneas & Thanasis Stengos, 2006. "Economic development and the return to human capital: a smooth coefficient semiparametric approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 111-132.
- Maasoumi, Esfandiar & Racine, Jeff, 2006.
"Growth And Convergence: A Profile Of Distribution Dynamics And Mobility,"
Departmental Working Papers
0605, Southern Methodist University, Department of Economics.
- Maasoumi, Esfandiar & Racine, Jeff & Stengos, Thanasis, 2007. "Growth and convergence: A profile of distribution dynamics and mobility," Journal of Econometrics, Elsevier, vol. 136(2), pages 483-508, February.
- Markusen, James R. & Venables, Anthony J., 1999.
"Foreign direct investment as a catalyst for industrial development,"
European Economic Review,
Elsevier, vol. 43(2), pages 335-356, February.
- James R. Markusen & Anthony J. Venables, 1997. "Foreign Direct Investment as a Catalyst for Industrial Development," NBER Working Papers 6241, National Bureau of Economic Research, Inc.
- Pack, Howard & Page, John Jr., 1994. "Accumulation, exports, and growth in the high-performing Asian economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 199-235, June.
- Barro, R.J., 1989.
"Economic Growth In A Cross Section Of Countries,"
RCER Working Papers
201, University of Rochester - Center for Economic Research (RCER).
- Sperlich, Stefan & Tj stheim, Dag & Yang, Lijian, 2002.
"Nonparametric Estimation And Testing Of Interaction In Additive Models,"
Cambridge University Press, vol. 18(02), pages 197-251, April.
- Sperlich, Stefan & Tjøstheim, Dag & Yang, Lijian, 1998. "Nonparametric estimation and testing of interaction in additive models," SFB 373 Discussion Papers 1998,14, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Robert J. Barro, 2012.
"Inflation and Economic Growth,"
CEMA Working Papers
568, China Economics and Management Academy, Central University of Finance and Economics.
- Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-54, July.
- Steven N. Durlauf & Andros KOURTELLOS & Chih Ming Tan, 2007.
"Are Any Growth Theories Robust?,"
Discussion Papers Series, Department of Economics, Tufts University
0703, Department of Economics, Tufts University.
- Paul M. Romer, 1989.
"Human Capital And Growth: Theory and Evidence,"
NBER Working Papers
3173, National Bureau of Economic Research, Inc.
- Romer, Paul M., 1990. "Human capital and growth: Theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 251-286, January.
- Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
- Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
- Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
- Winford H. Masanjala & Chris Papageorgiou, 2004. "The Solow model with CES technology: nonlinearities and parameter heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 171-201.
- Vinish Kathuria, 2001. "Foreign firms, technology transfer and knowledge spillovers to Indian manufacturing firms: a stochastic frontier analysis," Applied Economics, Taylor & Francis Journals, vol. 33(5), pages 625-642.
- Lau, Lawrence J. & Jamison, Dean T. & Louat, Frederic F., 1991. "Education and productivity in developing countries : an aggregate production function approach," Policy Research Working Paper Series 612, The World Bank.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988.
"Industrialization and the Big Push,"
NBER Working Papers
2708, National Bureau of Economic Research, Inc.
- Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996.
"Foreign Direct Investment and Growth in EP and IS Countries,"
Royal Economic Society, vol. 106(434), pages 92-105, January.
- V N Balasubramanyam & M Salisu & David Sapsford., . "Foreign Direct Investment and Growth in EP and IS Countries," Working Papers ec18/94, Department of Economics, University of Lancaster.
- Durham, J.B.J. Benson, 2004. "Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth," European Economic Review, Elsevier, vol. 48(2), pages 285-306, April.
- Andros Kourtellos, 2002. "Modeling Parameter Heterogeneity in Cross Country Growth Regression Models," University of Cyprus Working Papers in Economics 0212, University of Cyprus Department of Economics.
- Henderson, Daniel J. & Papageorgiou, Chris & Parmeter, Christopher F., 2008. "Are any growth theories linear? Why we should care about what the evidence tells us," MPRA Paper 8767, University Library of Munich, Germany.
- Walz, Uwe, 1997. "Innovation, Foreign Direct Investment and Growth," Economica, London School of Economics and Political Science, vol. 64(253), pages 63-79, February.
- Robert J. Barro & Jong-Wha Lee, 2000.
"International Data on Educational Attainment: Updates and Implications,"
CID Working Papers
42, Center for International Development at Harvard University.
- Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
- Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
- Cai, Zongwu & Das, Mitali & Xiong, Huaiyu & Wu, Xizhi, 2006. "Functional coefficient instrumental variables models," Journal of Econometrics, Elsevier, vol. 133(1), pages 207-241, July.
- Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
- Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
- Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995.
"How Does Foreign Direct Investment Affect Economic Growth?,"
NBER Working Papers
5057, National Bureau of Economic Research, Inc.
- Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
- Baldwin, Richard & Braconier, Henrik & Forslid, Rikard, 1999.
"Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence,"
CEPR Discussion Papers
2155, C.E.P.R. Discussion Papers.
- Richard Baldwin & Henrik Braconier & Rikard Forslid, 2005. "Multinationals, Endogenous Growth, and Technological Spillovers: Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 945-963, November.
- Braconier, Henrik & Baldwin, Richard E. & Forslid, Rikard, 1999. "Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence," Working Paper Series 519, Research Institute of Industrial Economics.
- KH Zhang, 2001. "Does Foreign Direct Investment Promote Economic Growth? Evidence From East Asia And Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 175-185, 04.
- Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
- Blomstrom, Magnus, 1986. "Foreign Investment and Productive Efficiency: The Case of Mexico," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 97-110, September.
- Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
- John Xu Zheng, 1996. "A consistent test of functional form via nonparametric estimation techniques," Journal of Econometrics, Elsevier, vol. 75(2), pages 263-289, December.
- Chunrong Ai & Xiaohong Chen, 2003. "Efficient Estimation of Models with Conditional Moment Restrictions Containing Unknown Functions," Econometrica, Econometric Society, vol. 71(6), pages 1795-1843, November.
- Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
- Jose De Gregorio, 1991.
"Economic Growth in Latin America,"
IMF Working Papers
91/71, International Monetary Fund.
- Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 1-16, February.
- Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
- Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
- Durlauf, Steven N. & Kourtellos, Andros & Minkin, Artur, 2001.
"The local Solow growth model,"
European Economic Review,
Elsevier, vol. 45(4-6), pages 928-940, May.
When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:32:y:2010:i:3:p:858-871. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.